**Beijing**: In a significant escalation of the tech rivalry with the US, China has added Shield AI to its Unreliable Entity List, halting its business activities in China. This move raises concerns over Taiwan’s military capabilities and the growing autonomy in drone warfare lead by companies like Shield AI.
In a significant development in the ongoing technological cold war between the United States and China, Beijing has blacklisted Shield AI, a San Diego-based defence technology firm, adding it to its Unreliable Entity List alongside five other American companies. The decision, which took effect immediately, prohibits these companies from conducting business or making new investments within China.
The Chinese government has framed its decision as a defence of national sovereignty, citing “military technology cooperation” between Shield AI and Taiwan, which Beijing views as part of its territory. China’s Ministry of Commerce described the action as a preemptive measure to protect “national security and development interests.”
Founded in 2015 by former Navy SEAL Brandon Tseng, his brother Ryan Tseng, and engineer Andrew Reiter, Shield AI has emerged as a key player in military drone innovation, particularly in developing autonomous systems aimed at reducing human input in combat scenarios. The company’s leading product, the V-BAT drone, is an AI-driven vertical take-off and landing (VTOL) unmanned aerial vehicle. With a length of approximately 10 feet and a wingspan of 9 feet, the V-BAT can hover like a helicopter and cruise like a fixed-wing aircraft, offering significant operational versatility. At the heart of its innovation is Hivemind, a software that enables the drone to navigate, map, and adapt in real-time without human operators or GPS guidance, even under electronic warfare conditions where satellite signals may be compromised.
The operational autonomy of the V-BAT represents a considerable advancement in drone warfare. Shield AI’s technology has already been deployed by various branches of the U.S. military, including Special Operations Command, the Navy, Air Force, and Marine Corps, with reports indicating use in combat since at least 2021 in the Middle East.
China’s targeting of Shield AI underscores a growing concern regarding Taiwan’s strategic position and military capabilities. The island is home to TSMC, the leading producer of semiconductors globally, which are essential for advanced technologies including drones. Chinese officials perceive any enhancement of Taiwan’s defensive capabilities through such partnerships as a direct threat.
In April 2025, the People’s Liberation Army (PLA) conducted extensive military exercises in the Taiwan Strait, heightening concerns about military tensions in the region. Chinese military planners are acutely aware of the disruptive potential of autonomous systems such as the V-BAT. In contrast to China’s drone capabilities, which often rely on satellite links and operator commands, Shield AI’s systems are designed to function with a higher degree of autonomy—an attribute that could reshape strategic calculations in the region.
Brandon Tseng’s initiative to create Shield AI was influenced by his experiences in Afghanistan, where lack of adequate intelligence during missions led to preventable casualties. The firm that began as a $100,000 startup has grown significantly to a valuation of $5.3 billion, employing nearly 1,000 individuals in various locations, including San Diego, Dallas, Washington D.C., and recently Ukraine, where it supports frontline operations.
The escalating interest in autonomous systems within the Pentagon is encapsulated by the Department of Defense’s Replicator Initiative, launched in 2023. This initiative aims to deploy thousands of low-cost, AI-powered drones by 2025 to counterbalance China’s advantages in military numbers. Since March 2025, Shield AI has attracted substantial investment, including a $240 million funding round led by L3Harris and tech investment firm Andreessen Horowitz.
Although Shield AI does not significantly rely on Chinese suppliers, the implications of the blacklist extend beyond the company itself. China’s dominance in the production of rare earth minerals, which are crucial for drone manufacturing, poses challenges for Shield AI and similar companies. With over 70% of global output, China’s recent extension of rare earth export bans to the U.S. may increase costs and delay production timelines for American firms reliant on these materials.
Despite the potential hurdles posed by the ban, some industry observers suggest that being blacklisted by China could bolster Shield AI’s standing in Washington. A former Pentagon official remarked, “Getting blacklisted by China is almost like a seal of approval. It shows you’re building something that they view as a real threat.”
The competition in the global drone sector has expanded to include nations like Japan and Australia, both of which are developing their own AI-powered unmanned systems. Japan’s ATLA defence agency has initiated testing of autonomous maritime drones, while Australia has enhanced drone collaboration with U.S. firms under the AUKUS alliance. In parallel, China is broadening its reach through the export of its drone technology to military forces in countries such as Saudi Arabia, the UAE, and Pakistan, potentially altering the global landscape of military influence.
As warfare increasingly becomes reliant on data-driven strategies, the capacity for autonomy in drones will play a pivotal role in future combat scenarios. Shield AI continues to navigate the balance between innovation and scrutiny, emphasising the necessity of maintaining human oversight in decision-making within its autonomous systems.
Although China’s blacklist could be seen as a setback, it underscores the accelerating decoupling of technological and military resources between the U.S. and China. Shield AI, facing a transitional period, finds itself at the forefront of this evolving landscape where control over AI technology and supply chains becomes paramount. The implications of this geopolitical and technological shift resonate beyond the business realm, hinting at a new paradigm of warfare characterised by adaptability and intelligence, positioning Shield AI as a significant player in the future of military operations.
Source: Noah Wire Services
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